Relationships V Performance (suitability)

or Register to post new content in the forum

29 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Jul 30, 2008 4:55 pm

Hey guys,

 
I am new but I have a situation that might be unique, but I guess really might not be. 
 
I am a new FA in training but have been learning a lot latley and am not that new to investing anyways. I have talked with my gradma a lot over the years about her great relationship with her advisor "jane".  My grandma has never had anything bad to say about "Jane" or her investments ever.  
 
Background: Now my Grandma is 91, not in the best health and in an assisted living home with not a lot of money. 
 
Since I am now working as an FA, my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) and she was clearly in extremely unsuitable equites (closed end growth fund I believe) and ofcourse her advisor tells her she needs to ride it out, it will bounce back, etc.  In all reality it is too late to really try and fix anything now but part of me wants to call my grandma's advisor myself and let her know what a horrible advisor she is.  God only knows if any churning or other high commission tactics have been used as well over the years. 
 
My specific problem is that I know it would break my grandma's heart if I told her the truth about the horrible job the her advisor has done over the years but this situation really raises the question for what to actually do when a relationship is so strong that the advisor can literaly rip off a client?  It seems situations like this will come up where prospects will need to be helped immediately but trust their advisor so much they won't budge. 
 
Opinions?
 
 
Jul 30, 2008 5:01 pm

What if this closed end fund is kicking out 12% dividend yield and your grandma is using that income?

 
Then it wouldn't be the advisor that sucks, it would be you that is naive.  Not saying this is the case, necessarily, I don't know what CEF it is.
 
But if she is getting income, it is likely the value would be down.
Jul 30, 2008 5:03 pm

This is what differentiates advisors.  There are those who decide making money is the whole point behind building a relationship.  There are others who understand that through ethical business decisions with their investor's money that money will find its way to them.  Personally, I feel the advisor should maintain an ethical business while promoting strong relationships with clients.  In your grandmothers case, I think she may have been taken advantage of.  At her current point in life, I would not bring up how she was taken to the wash over many years.  I would just use this as a learning experience.  As an FA, you have the power to do exactly as her FA, or you can handle events differently.  I hate to hear about things like this, which is why I want to become an FA.  I am curious to see what others say on this topic since I'm not in the business yet.

Jul 30, 2008 5:04 pm
buildingwealth:

Hey guys,

 
I am new but I have a situation that might be unique, but I guess really might not be. 
 
I am a new FA in training but have been learning a lot latley and am not that new to investing anyways. I have talked with my gradma a lot over the years about her great relationship with her advisor "jane".  My grandma has never had anything bad to say about "Jane" or her investments ever.  
 
Background: Now my Grandma is 91, not in the best health and in an assisted living home with not a lot of money. 
 
Since I am now working as an FA, my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) and she was clearly in extremely unsuitable equites (closed end growth fund I believe) and ofcourse her advisor tells her she needs to ride it out, it will bounce back, etc.  In all reality it is too late to really try and fix anything now but part of me wants to call my grandma's advisor myself and let her know what a horrible advisor she is.  God only knows if any churning or other high commission tactics have been used as well over the years. 
 
My specific problem is that I know it would break my grandma's heart if I told her the truth about the horrible job the her advisor has done over the years but this situation really raises the question for what to actually do when a relationship is so strong that the advisor can literaly rip off a client?  It seems situations like this will come up where prospects will need to be helped immediately but trust their advisor so much they won't budge. 
 
Opinions?
 
 
 
So let me see if I have this straight.  You aren't even sure what type of investment it is, but the fact it has gone down makes it unsuitable and probably means the advisor is also churning granny.  Did I read that right?  Have her show her statement to a real financial advisor quick.  I can't tell you if granny is invested correctly, but it appears you don't know either.  Find someone who does.
Jul 30, 2008 5:05 pm

I woudl sign grandma's name to your transfer out paperwork and mover her to all American funds...sprinkle a little BAC or CITI in there...pat yourself on the back and talk to your other grandparents about what you've done for nellie.  Caution...make it look like grandma's signature...

Obviously, you know a tremendous amount more than her longtime advisor...SO GET ON WITH IT...
Jul 30, 2008 5:09 pm

Quick, close your mouth spears, your IQ is starting to show. 

Jul 30, 2008 5:11 pm

Did I steal your thoughts there spiff...you can change it to...I don't know..maybe Franklin Templeton...

Jul 30, 2008 5:28 pm

Maybe I didn't make it clear enough.

 
She is in a small cap growth fund and it is has been extremely volitile (very high beta).  I guess some don't care about suitability for a 90 year old as long as their might be some dividend payments.
Jul 30, 2008 5:32 pm

See posts on conducting business with friends and family. You are dealing at an emotional level from some of your comments. Understandable but....!!!!!

Jul 30, 2008 5:33 pm

You don't know that the investment is unsuitable because you don't know what it is.  Do you know what your Grandmother's net worth, risk tolerance etc is?  Probably not.   Most family members are closed mouthed about their own finances.  You have no idea what the conversations between your Grandmother and Jane(advisor) went like.  I have some elderly clients who STILL want to be players and insist on buying riskier things.  (Of course, we do the required disclosures, where I have them sign that they bought this despite my advice not to do so.) 

 
Since you are still new and not really knowlegable about investments OR your Grandmother, I would suggest you consult with a more experienced broker review the account and speak with your Grandmother in the presence of another family member or two
 
Jul 30, 2008 5:35 pm

I doubt your grandma is in a small cap growth fund...especially with compliance the way it is. ...and not sure when small cap growth funds started paying high dividends.. do you mean aggressive income...but if your dead set on moving your grand mamas acct so you can help her..follow Ferris's advice and be a hero...

Jul 30, 2008 5:38 pm
schlemoc:

This is what differentiates advisors.  There are those who decide making money is the whole point behind building a relationship.  There are others who understand that through ethical business decisions with their investor's money that money will find its way to them.  Personally, I feel the advisor should maintain an ethical business while promoting strong relationships with clients.  In your grandmothers case, I think she may have been taken advantage of.  At her current point in life, I would not bring up how she was taken to the wash over many years.  I would just use this as a learning experience.  As an FA, you have the power to do exactly as her FA, or you can handle events differently.  I hate to hear about things like this, which is why I want to become an FA.  I am curious to see what others say on this topic since I'm not in the business yet.

 
You think she was taken advantage of?  Are you serious?  From what this neophyte said, you're able to infer all that?
 
What if grandma was in a municipal bond fund and the fund is down?  She is still getting income.  Preferreds, closed end funds, bonds, these are how many old folks live...from the income of these investments.  And just about ALL of them are down, some down a lot this year.
 
Don't come on here and give advice until you know what you're doing.  You're not even an FA.  Unbelievable.
Jul 30, 2008 5:40 pm
babbling looney:

You don't know that the investment is unsuitable because you don't know what it is.  Do you know what your Grandmother's net worth, risk tolerance etc is?  Probably not.   Most family members are closed mouthed about their own finances.  You have no idea what the conversations between your Grandmother and Jane(advisor) went like.  I have some elderly clients who STILL want to be players and insist on buying riskier things.  (Of course, we do the required disclosures, where I have them sign that they bought this despite my advice not to do so.) 

 
Since you are still new and not really knowlegable about investments OR your Grandmother, I would suggest you consult with a more experienced broker review the account and speak with your Grandmother in the presence of another family member or two
 
 
This is exactly what I tried to ask.  Since I am new, I wanted to know that since people like my grandma trust their advisor but are obviously not in suitable investments what is the advisor actually helping them with? 
 
To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent. So yes, even as a newbie, I would believe she is in too risky of an investment. 
Jul 30, 2008 5:40 pm

First you weren't sure what the CEF was, now it is a small cap growth CEF?  With a high beta?  That was quick.  How about posting which CEF you are talking about.

Jul 30, 2008 5:53 pm

BOYS ...BOYS , you are now going to really confuse Buildingwealth. Sorry Babbling ( includes ladies too ) . No experience , seek the assistance of an independent advisor. You are emotionally attached and are not well versed in the business matters that apply to your Grandmother.

Jul 30, 2008 6:03 pm
iceco1d:

Better yet, how about all of the insurance products & securities on her statement(s)...post the whole thing.

 
I second this.  Post what she's got.
Jul 30, 2008 6:14 pm

To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent

 


Ahem....have you taken a look at the markets in the last couple of quarters???? 
 
Try to find a mutual fund that has a positive YTD performance . Take a gander at the 1 year performance charts.  With the exception of some sector funds like commodities, gold, a few global bond funds the majority of funds are in the tank.  This has nothing to do with being inappropriate or agressive.   Even the most conservative funds and fund families are under water.
 
So, when you are a big grown up actual advisor what are you going to say to your clients who have lost 20% of their portfolio because of overall market volitility and they come in blaming YOU YOU YOU for their losses.  Remember back to your studies about systematic risk.
 
Just because your Grandmother has lost 20% of her investment, like a lot of other people have, doesn't automatically mean that her investments are inappropriate.  In addition while she may be down 20% today she may still be up 20% from her initial investment.   How long has she been investing?  When did she invest this money? You don't know. do you? 
 
I have clients who are down in their portfolios from last year, and I need to remind them that even though their accounts have declined they still are positive in their overall investment portfolio.
 
You are jumping to a big conclusion based on emotion and illogical thinking.  In other words you are acting just like your clients (and ours) will be if you were their advisor.  Your job is to steer people through tough times like these, not panic and jump of the deep end with them.
 
 
Jul 30, 2008 6:38 pm
babbling looney:

To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent

 


Ahem....have you taken a look at the markets in the last couple of quarters???? 
 
Try to find a mutual fund that has a positive YTD performance . Take a gander at the 1 year performance charts.  With the exception of some sector funds like commodities, gold, a few global bond funds the majority of funds are in the tank.  This has nothing to do with being inappropriate or agressive.   Even the most conservative funds and fund families are under water.
 
So, when you are a big grown up actual advisor what are you going to say to your clients who have lost 20% of their portfolio because of overall market volitility and they come in blaming YOU YOU YOU for their losses.  Remember back to your studies about systematic risk.
 
Just because your Grandmother has lost 20% of her investment, like a lot of other people have, doesn't automatically mean that her investments are inappropriate.  In addition while she may be down 20% today she may still be up 20% from her initial investment.   How long has she been investing?  When did she invest this money? You don't know. do you? 
 
I have clients who are down in their portfolios from last year, and I need to remind them that even though their accounts have declined they still are positive in their overall investment portfolio.
 
You are jumping to a big conclusion based on emotion and illogical thinking.  In other words you are acting just like your clients (and ours) will be if you were their advisor.  Your job is to steer people through tough times like these, not panic and jump of the deep end with them.
 
 
 
I think we are on a totally different page and it is definitely my fault.  I 100% agree that everything investment is down, not to get emotionally involved, or to jump to any conclusions.  My concern was specifically that my grandma is 91, in poor health, and when she asked about her extremely risky investment her advisor said to ride it out.  That is my only concern.  I am 100% for small cap equties but just felt this was a fairly obvious case where it wasnt suitable.  Sorry if I am still not clear about my thinking.
Jul 30, 2008 6:44 pm

my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) then you said she was down 20% in the last month or two (is it one or two?) and down $7k recently (please define recently)

 
The last statement your grandmother has is from June.  Please post the CEF although I doubt you will as this will blow your entire "problem" out of the water.  Best case scenario, you do not know how to read a statement.  Worst case, you keep amending your story searching for someone to agree with you to justify going after grandma's account.  Either way you are a danger to her.  Like babs said, find an experienced advisor to help you with this and stop ASSUMING because your grandmother has an investment that went down that she has been hosed for years.
Jul 30, 2008 6:56 pm

Someone please get a hold of this guy's parents before he does something to lose them more of their inheritance.